BEVERLY HILLS, July 25, (THEWILL) – The Monetary Policy Committee (MPC) of the Central Bank of Nigeria (CBN), in its meeting on Tuesday retained all monetary rates and proposed to encourage banks by giving credit to the real sector of the economy, at single digit rates.
This was revealed by the CBN Governor, Godwin Emefiele, after the end the Meeting in Abuja, said the mechanism was not designed to bring competition among Deposit Money Banks (DMBs) but to complement their efforts.
“The most important thing is that we want to see to it that we achieve a single digit rate. We believe this will work because rather than the banks keeping the money in the reserves, they can key into this and promote these transactions as long as they meet the terms and conditions,” he said.
“A differentiated dynamic cash reserve requirement regime will be implemented to direct cheap long term bank credit at nine per cent and a minimum tenor of seven years and two years moratorium to the employment elastic sectors of the economy.
“MPC was concerned that credit to the economy was sliding and we looked at means to incentivise the DMBs to increase credit to the real sector.”
He revealed that the MPC was of the opinion that while it is difficult to encourage job creation in a deficit infrastructure environment, the committee believes the bank should continue to encourage DMBs to increase the flow of credit to the real sector to consolidate economic recovery.
To achieve this, Emefiele said two approaches were considered. The first, in order to achieve the objective of lowering interest rate particularly to those priority sectors such as manufacturing and agricultural sectors, the CBN will encourage large corporates to issue commercial papers/note to the market and there will be a memorandum that will detail explanations of what they are going to do with that money.
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